Sting Operation Led to Google's $500M Pharma Ad Settlement with DOJ

  |  August 24, 2011   |  Comments

Google coughed up $500 million to the U.S. Justice Department to settle an illegal pharmacy advertising case.

Google coughed up $500 million to the U.S. Department of Justice to settle a case involving illegal drug sales, a fraudulent fugitive, and sting operation websites. The company sold ads to Canadian pharmacies illegally sending drugs to the U.S. Earlier this year, Google hinted at the DOJ investigation in a Securities and Exchange Commission filing.

"The Department of Justice will continue to hold accountable companies who in their bid for profits violate federal law and put at risk the health and safety of American consumers," said Deputy Attorney General James Colein a press release. "This settlement ensures that Google will reform its improper advertising practices with regard to these pharmacies while paying one of the largest financial forfeiture penalties in history."

According to the DOJ release, Google's settlement reflects its acknowledgement that the company "improperly assisted Canadian online pharmacy advertisers to run advertisements that targeted the United States through AdWords…." Investigators also found that between 2003 and 2009, Google assisted some of the involved pharmacy advertisers in placing and optimizing AdWords ads and landing pages.

"We banned the advertising of prescription drugs in the U.S. by Canadian pharmacies some time ago. However, it's obvious with hindsight that we shouldn’t have allowed these ads on Google in the first place. Given the extensive coverage this settlement has already received, we won't be commenting further," stated a Google spokesperson in an email sent to ClickZ.

The DOJ release stated, "The forfeiture, one of the largest ever in the United States, represents the gross revenue received by Google as a result of Canadian pharmacies advertising through Google's AdWords program, plus gross revenue made by Canadian pharmacies from their sales to U.S. consumers."

The investigation has especially scandalous roots. According to the release, a man under investigation for financial fraud sought refuge in Mexico, where he bought AdWords to promote his unlawful drug sales business. "During the ensuing investigation of Google, the government established a number of undercover websites for the purpose of advertising the unlawful sale of controlled and non-controlled substances through Google's AdWords program," the release said.

In an Securities and Exchange Commission report filed earlier this year, Google indicated it had set aside $500 million, noting the stash was held "in connection with a potential resolution of an investigation by the United States Department of Justice into the use of Google advertising by certain advertisers…."

The investigation was conducted by the U.S. Attorney's Office in Rhode Island and the FDA/OCI Rhode Island Task Force. The Food and Drug Administration also monitors pharmaceutical ad content, and pharma drug brand advertisers are especially risk averse in their use of online advertising, social media, and other digital platforms due to a lack of clear guidance on what is required of them by the FDA in those environments.

"The result of this investigation has been a fundamental transformation of Internet pharmacy advertising practices, significantly limiting promotion to U.S. consumers by rogue online pharmacies," said Kathleen Martin-Weis, acting director of the FDA's Office of Criminal Investigations in the release.

Once the company learned of the investigation in 2009, Google started requiring that pharma advertisers be certified by the National Association of Boards of Pharmacy's Verified Internet Pharmacy Practices Sites. Google also hired an outside firm to sniff out flaws in its pharma advertiser screening system.

The company filed a civil suit in federal court against what it called "rogue" pharmacy advertisers in September 2010. Google explained its challenges in keeping illegal pill sellers off its ad platform in a company blog post about a year ago, written by Michael Zwibelman, Google's litigation counsel. "As we and others build new safeguards and guidelines, rogue online pharmacies always try new tactics to get around those protections and illegally sell drugs on the web…. This has meant that despite our best efforts - from extensive verification procedures, to automated keyword blocking, to changing our ads policies - a small percentage of pharma ads from these rogue companies is still appearing on Google."


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Kate Kaye

Kate Kaye was Managing Editor at ClickZ News until October 2012. As a daily reporter and editor for the original news source, she covered beats including digital political campaigns and government regulation of the online ad industry. Kate is the author of Campaign '08: A Turning Point for Digital Media, the only book focused on the paid digital media efforts of the 2008 presidential campaigns. Kate created ClickZ's Politics & Advocacy section, and is the primary contributor to the one-of-a-kind section. She began reporting on the interactive ad industry in 1999 and has spoken at several events and in interviews for television, radio, print, and digital media outlets. You can follow Kate on Twitter at @LowbrowKate.

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